Opinion: The unforgiveable Public Service Loan Forgiveness Program

By Helaine Olen

Saturday

Sep 21, 2019 at 3:58 PM

New York City public school teacher Kelly Finlaw believed her student debt would be forgiven because she was participating in the Public Service Loan Forgiveness Program. Enacted in 2007 as part of a broader package of student loan reforms, the initiative was intended to encourage students to take lower-paying jobs with nonprofits and the public sector. Eligible borrowers would make 10 years of payments, and their student loan balance sheet would be wiped clean.

It didn't work out that way. When the first groups of borrowers — preschool teachers and public service lawyers, police officers and firefighters — eligible for relief under the legislation applied for the promised benefit, a little more than 1 percent saw their remaining debt forgiven.

As a congressional hearing Thursday made clear, Finlaw and thousands of other borrowers were let down by an uncaring bureaucracy, by the student loan processing companies that couldn't be bothered to take the time to explain a complicated law, and, most egregiously, by Betsy DeVos' Education Department and the Trump administration.

This betrayal gets to the heart of what is wrong with the United States in 2019, when many corporations feel free to act with impunity, secure in the knowledge that the federal government in the form of the Trump administration will not only not call them to account but will actively have their backs.

"I did what I was asked to do. I called. I made my payments on time. I paid every month," Finlaw explained to the House Committee on Education and Labor. In return, "I was lied to several times. Directly lied to. In fact, I was told several times to do things that in the end put me in a worse place."

What went wrong? Well, the better question is: What didn't go wrong?

Almost everyone agrees the language of the originating statute was sloppy. Only certain, very specific kinds of loans were eligible for forgiveness. The same was true for the repayment plans the borrowers enrolled in. But then the convoluted student loan processing companies kicked in. Over and over again, borrowers report that the companies servicing their loans misinformed them. They weren't told about consolidation plans that would make their loans eligible for relief. Payments were misapplied, knocking them off track without borrowers' knowledge. There were seemingly thousands of ways to get this wrong, and almost no way to get it right.

Congress, after a rash of bad press, designated a pot of money and a relaxation of the arcane and hard-to-navigate rules for the first cohort of public service debtors seeking relief. Not so fast, said the Education Department, under the leadership of DeVos.

Under the billionaire heiress, whom I've deemed "the worst member of Trump's Cabinet" for her extra-special devotion to comforting the comfortable, the Education Department set up a convoluted, illogical and all-but-impossible application process for the initially denied borrowers seeking forgiveness through the new program to follow. According to a report released this month by the Government Accountability Office, a stunning 99 percent of the applicants to that program were once again denied relief.

There are now lawsuits. Finlaw is a named plaintiff in one filed by the American Federation of Teachers against DeVos and the Education Department. The Massachusetts Attorney General's Office filed another, this one against the Pennsylvania Higher Education Assistance Authority, also known as FedLoan Servicing, which handles the program on behalf of the federal government.

FedLoan officials were offered the chance to testify at Thursday's hearing. They declined. The Department of Education sent a representative, who claimed it was simply following the law. As for the situation itself? "Regrettable," the Education Department's representative described it in written testimony.

"Regrettable" is a word that can be used if you spill red wine on a favorite white dress. This is far worse. Americans planned their lives around the Public Service Loan Forgiveness Program. They stayed in jobs because of the promises and assurances from the government and the student loan industry. And then — poof! — it didn't happen. They were betrayed, and then the government used technicalities to get out of what had been promised.

This is hardly the only instance of government and industry coming together to screw Americans over. Millions lost their homes in the foreclosure crisis, while banks got bailed out. Greedy pharmaceutical companies fueled an opioid epidemic that has killed tens of thousands of Americans. These are the actions that are eating away at the fabric of our society, sowing distrust in civic life, business and even other people. It's not regrettable. It's wrong.

Helaine Olen is a contributor to The Washington Post and the author of "Pound Foolish: Exposing the Dark Side of the Personal Finance Industry."

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